We are often asked about low body corporate fees. Are low body corporate levies really such a good arrangement? And why do they vary so much between buildings?
Table of Contents:
- QUESTION: How can a lot owner assess whether their body corporate levies are reasonable and not too high?
- ARTICLE: How To Find Units With Low Body Corporate Fees
- QUESTION: Our fees are less than $42 per week and I know this is extremely reasonable in Brisbane. Could you please advise whether fees are cheaper interstate?
- QUESTION: For a building of 4 townhouses, how would the strata levies be? How much should we have in the sinking fund?
Question: How can a lot owner assess whether their body corporate levies are reasonable and not too high?
Answer: All owners should be able to access transparent information about the finances of their plan through their body corporate manager.
All owners should be able to access transparent information about the finances of their plan through their body corporate manager. If you can’t that’s a warning sign that there may be an issue. For example, at Tower Body Corporate, financial records are available to owners via an online portal, then if you need it more detailed reporting can be provided by the manager. That would give you an idea of where things stand and you can move discussions forward from there.
Get a copy of the budget for your scheme and expenses for the past couple of years. Then, review item by item to understand the ongoing expenditure. Look at the sinking fund report and account to get an idea if your schemes is investing enough in regular maintenance of the building (most aren’t). Ask questions about expenses to the treasurer and body corporate manager and see what responses come back. If there are clear, logical answers then that’s probably a positive sign.
In any budget there are likely to be some areas where it is possible to get a lower price for services provided. As a manager, I frequently look at items such as whether standing contracts have risen above the market price, compare the costs of contractors for routine work and consider whether a scheme can be more efficient to help reduce big ticket costs such as utility usage. These considerations need to be weighed up against the value returned on expenditure. Some contractors may charge more than others, but if you know they are reliable and do quality work that may be a price worth paying. The old business maxim, “you can have it fast, cheap or good – just pick any two out of the three” tends to ring particularly true when it comes to body corporate expenses.
This post appears in the April 2021 edition of The QLD Strata Magazine.
How To Find Units With Low Body Corporate Fees
Average body corporate fees in South East Queensland run around $5,000 – $6,000 per annum. That’s $96 – $115 per week. Many are a lot higher. The highest levy I’ve ever seen was around $25,000 p.a. or $480 per week.
And of course, many levies are much lower than that average. The lowest levy I’ve seen was $165 per annum which was for a body corporate that was a narrow slip of land between some houses and the ocean.
So why do body corporate fees vary so widely?
The levies in a building reflect the cost of running that building and will be a direct result of:
- Size of the building
- Location of the body corporate
- Design and construction of body corporate common property
- What facilities are included
Size Really Does Matter (when it comes to body corporate fees)
Smaller buildings have less expensive body corporate fees, but then, larger buildings can also be reasonable. The most expensive levies are found in mid-sized buildings.
A smaller building is cheaper to run because it simply doesn’t require as much work. There’s less to clean and power and fewer repairs and maintenance (on average, buildings are highly individual) because there’s just less of the building.
However, there are also fewer owners to contribute to covering the costs, which is something larger buildings take advantage of. Past a certain point, around 150 – 200 lots, economies of scale kick in. Bigger buildings are substantially more complicated and expensive to run, but, the cost per lot owner is reduced because of the number of lots sharing the costs.
Mid-sized buildings are usually the most expensive in terms of levies. They have higher running costs associated with large buildings but not the economies of scale that reduce costs per lot owner in larger buildings.
Environmental issues do play a part in how much buildings cost to run.
For instance, buildings in the centre of the city may have noise and pollution issues that might require some creative solutions from the body corporate. Buildings near the ocean will be more vulnerable to storms and damage from salt water. A search of any building in the “Schoolies” zone in Surfers Paradise will turn up ongoing discussions about security.
Different locations have different problems all of which need to be addressed by body corporates and paid for by lot owners.
What Are You Made Of?
Standard format plans, or gated communities, are, for the most part, cheaper to run than building format plans or apartment buildings. Standard format plans have less common property and that means fewer levies are required to maintain said common property.
An apartment building constructed from block will be cheaper to maintain than one that is rendered or wood, both of which require regular painting and treatment.
A building with elevators is more expensive to run that one with just stairs.
Technological add-ons, something developers have been embracing of late, are more expensive to maintain than standard alternatives. Sure the technology marvels are great, but they can become obsolete quickly and then be difficult to replace or maintain.
Buildings design and construction is, along with size, a key factor in levy cost.
You Get What You Pay For
The main driver of body corporate expenses though is facilities.
If the body corporate boasts a swimming pool, extensive gardens or a gym then correspondingly the cost of the levies will increase. After all, someone must maintain the swimming pool, and the gardens and the gym, all body corporate costs, all funded by levies.
Body corporates come with an enormous range of facilities including spas, saunas, games rooms, barbeques, theatres, libraries, media rooms and even individual pools per unit. Any facility offered is a double-edged sword as it drives up the cost of levies.
The biggest and costliest facility in Queensland buildings is a building manager or Resident Unit Manager (RUM). The RUM is, basically, a contractor hired by the body corporate to undertake certain tasks, usually cleaning, gardening and small repairs.
Size, Location, Design and Facilities Are All Decided By The Developer
For most body corporates the choice of whether or not to have a RUM is made by the developer, along with decisions about facilities, construction and design, location and size.
Developers design projects balancing exciting designs that they think will sell against expected running costs. They must provide projected levy costs when selling off the plan.
The problem is that levies don’t stay at the projected position. All levies increase, usually in keeping with CPI, but levies in new buildings increase quicker as the real cost of running the body corporate becomes apparent.
Some developers are taking this into account and are building with a view to keeping costs low. The Evoque development in Kelvin Grove, for example, is a low rise building with no gym and no pool and 20 units. Best of all levies are just $1,500 per year or around $28 per week.
A low levy body corporate will likely attract a lot of investors.
It’s a different story when you’re choosing somewhere to live through, where the things that likely affect decisions to buy are location, size, design and facilities, all the things that drive levy costs.
This article has been republished with permission from the author and first appeared on MyBodyCorpReport.com.au.
Question: Our fees are less than $42 per week and I know this is extremely reasonable in Brisbane. Could you please advise whether fees are cheaper interstate?
I am in the process of selling my unit in a flat market.
Two recent potential buyers, one from Sydney and one from Victoria both commented to the agent that the BC fees were expensive in QLD.
Our fees are less than $42 per week and I know this is extremely reasonable in Brisbane.
Could you please advise whether fees are cheaper interstate (for an older style small complex such as ours) or are these purchasers misunderstanding disclosure statements?
Answer: There is no mechanism to compare weekly body corporate costs suburb by suburb, let alone state by state.
There is no mechanism to compare weekly body corporate costs suburb by suburb, let alone state by state. And even if there was, the costs alone are only one side of the coin – the other side is the facilities in the scheme and the value of the building (if the body corporate is required to insure it).
A unit may be worth the same as the one next door or in the next state, but if there are three pools to maintain as opposed to none, the costs are going to be more – even if spread amongst more owners.
This market is very opaque in that sense and there is no public record of this type of data available.
This post appears in the September 2020 edition of the QLD Strata Magazine.
Question: For a building of 4 townhouses, how would the strata levies be? How much should we have in the sinking fund?
For a block of 4 townhouses on a large battle axe block with no lifts, only an electric driveway gate, how much should be in the sinking fund and how much would the levies be for a property of total value $2.5-$3million?
I’m after an indication of average levies for a building of this size and value.
Answer: Levies do not have any direct relationship to the intrinsic value of property.
From a database sourced from audited financial statements of over 150 schemes, it is not easy taking an average, as we have schemes that range in sinking fund reserves from 3 Months up to 17 Years!
- Levies do not have any direct relationship to the intrinsic value of the property, and the land component is often the greatest value component of the site with the only costs relating to the improvements upon the land.
- A detailed capital budget needs to be drawn up for the sinking fund which covers off on the non recurrent / lumpy items relating to the common property such as painting, roof replacement, carpets, plumbing, electrical, fire protection, pool relining, paths and refurbishment of gardens, etc, based on a time frame for the expenditure being undertaken.
It is suggested that there are far more items to be considered when talking about how much levies are than just being limited to the only expenditure of an electric driveway. This is generally undertaken by a quantity surveyor skilled in accessing / estimating future costs over a longer time frame such as 10-15 years, which forms the basis of smoothing out annual sinking fund levies.
- It is unlikely that these skills are readily available from committee members to undertake to provide their own sinking fund levies.
- The need for special levies is generally evidence of poor skills or inappropriately managed the levying of sinking funds to progressively store up future adequate value to smooth out these lumpy expenditures.
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of advice.
This post appears in Strata News #115.
Have a question or something to add to the article? Leave a comment below.
- QLD: Q&A Levy Increases – As Lot Owners, Can We Refuse?
- NSW: Q&A Can I Reduce My Strata Levies By Doing My Own Mowing?
- Is there enough money in our sinking fund?
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